Is SaaS Cheaper? Who Cares, It’s Better

Over on ReadWriteWeb, Jason Rothbart posted rhetorically asking the questions as to whether SaaS is cheaper than traditional installed software. Jason used the following (admittedly pretty off-the-cuff) example to “prove” the hypothesis that, yes, SaaS is cheaper;

Let’s look at a real-world example. A 100-person company has been sharing files via email and internal servers. The executives have finally concluded they need to join the 21st century and put a solution in place. One option is to implement SharePoint. Here is a rough estimate of what that might cost:

Year 1

Total = $29,590

Year 2 and on

Total = $8,000

I know of a SaaS solution that has 80% of the file-collaboration functionality of SharePoint but charges $850 per month for 100 users.

Year 1

Total = $20,200

Year 2 and on

Total = $10,200

It would take over 4 and a half years before the licensed software became cheaper. By that time, I’m quite sure there would be another solution that could replace SharePoint, and the cycle would start again. We can quibble about the numbers, but you get the point. Plus, the numbers don’t reflect that the SaaS solution is likely to improve and innovate faster than the licensed software by a significant amount.

Of course it’s an argument that is as full of holes as the Vintage Gouda I ate this evening – Jason compares two different solutions, one of which is only 80% as functional as the other, but compares them like the same product. He omits the downstream issues of poor integration with the traditional office toold used by enterprise and he omits any risk assessment related to security compliance et al.

So do I disagree with Jason? Hell no – I also believe that SaaS is cheaper. But I don’t care, and I wish others would also move on from this aspect of the debate.

SaaS is better… on so many levels.

• SaaS allows the business to focus on core operations. Unless you’re an IT company, IT shouldn’t soak up any great proportion of your time
• SaaS greens your IT – by using SaaS apps, you’re leveraging the efficiencies obtained by the people who live and breath data hosting – the chances are they’re got a smaller carbon footprint per Meg than you’ll have
• SaaS = risk reduction. Forget worrying about ill sys-admins, forget concerns about sub-standard backups. SaaS vendors do this sort of basic stuff in their sleep
• SaaS increases your efficiency. MOSS licences come in user units – SaaS can be sliced and diced by seat, use hours, data transfer or whatever. SaaS lets a business squeeze the highest “bang per buck” out of their spend
• SaaS is quick – want to see some exciting graphs – check out some deployment time comparisons between SaaS and trad software
• Forget upgrade and patch hassles – your vendor sorts them with their cornflakes in the morning

So yeah… SaaS is cheaper.

But that sure as hell isn’t the reason we here at CloudAve wax poetic about it!